Demand for experiences over products on the rise

Naomi SimsonWhile concern is growing that many retailers may have had a lacklustre lead-up to Christmas, Red Balloon founder Naomi Simson says growing demand for non-traditional gifts has delivered for the online experience retailer over the holidays.

The entrepreneur said she was delighted with Christmas trading, but admitted that she was initially thrown-off by the unusual four-weekend month.

“The first week of December was soft and we were all in a state of worry, but there were four weekends this year which is unusual for retailers, so it all came in the last three weeks,” Simson told Inside Retail.

“We were pleased with the results, we saw growth year-on-year which was fantastic.”

Things may have not gone so well for the broader sector though, with survey data released by the Australian Industry Group (AIG) yesterday indicating subdued trading over the first three weeks of the holiday month.

The December edition of AIG’s Performance of Services Index (PSI) found that while activity across the services sector edged higher to 52 points, the sub-index for retail trade moderated to 44.5 points – with scores above 50 indicating an improvement and those below a deterioration.

The distance of scoring from 50, either above or below, indicates the speed at which conditions are improving or deteriorating, with this being the tenth month of flat or contracting activity for the retail sub-sector.

The PSI survey is not inclusive of post-Christmas trading in December, including the all-important Boxing Day sales.

Survey respondents said consumers finished the year with a cautious attitude due to cost-of-living pressures, but given that the hospitality index rose to 53.4 – the strongest result since August 2014 – it may be the case that shoppers wanted experiences over goods.

“Consumers might be more willing to spend their discretionary summer budget on services and experiences (e.g. holidays and eating out) than on goods (e.g. toys and clothes),” AIG’s report said.

That’s good news for Simson, with holiday sales bolstered by a new autonomous digital marketing platform and pop-ups in Myer’s Melbourne and Sydney stores, which engaged shoppers with VR demos of product packages.

“The fact that we got growth in Red Balloon attests to the fact that people are looking for experiences or tickets or things to do versus the straight stuff

,” Simson said.

“If retail was down and we got growth, that speaks even more to that point.”

Official data on retail spending in December won’t be available until the ABS releases its numbers in February, but November trading data is due to be released next Thursday.

The Australian Retailers Association has tipped Boxing Day sales at $2.34 billion, only slightly above its 2017 prediction, but its executive director Russell Zimmerman has said that he expects actual trading to exceed forecasts.

An eye on marketplaces in 2018

Looking forward to 2018 Simson says broadening Red Balloon’s distribution network is on the agenda, with plans in the works to offer its products on marketplaces following a deal late last year to provide experiences for Myer’s new market.

Simson declined to comment on which marketplaces Red Balloon was scouting, but said there are some “very interesting” partnerships on the horizon.

Data will also be a priority, after signing a deal with Albert technologies for an AI-enabled marketing platform last July, Simson said customer acquisition costs have decreased by as much as 70 per cent.

“This year it’s all about data and consumer insights, that’s nothing new but the tools we’re using are getting more and more sophisticated,” she said.

“Online media is extremely expensive, so the fact that we were able to deliver growth on reduced consumer acquisition has been great.

“It tells us about not only the sustainability of these technologies, but what the future looks like.”

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